BEFORE THE
UNITED STATES DEPARTMENT OF TRANSPORTATION
WASHINGTON, D.C.
—————————————————————
Petition of
:
:
NATIONAL AIR CARRIER ASSOCIATION :
:
For Rulemaking
:
:
14 CFR Parts 200 and 212
:
__________________________________________
Docket OST-2002-11741
COMMENTS OF THE AIR TRANSPORT ASSOCIATION OF AMERICA, INC.
Comments with respect to this document should be addressed to:
Rhett D. Workman
Director, International Programs
Air Transport Association of America, Inc.
1301 Pennsylvania Avenue, N.W.
Suite 1100
Washington, D.C. 20004-1707
Dated: May 14, 2002
BEFORE THE
UNITED STATES DEPARTMENT OF TRANSPORTATION
WASHINGTON, D.C.
—————————————————————
Petition of
:
:
NATIONAL AIR CARRIER ASSOCIATION :
:
For Rulemaking
:
:
14 CFR Parts 200 and 212
:
__________________________________________
Docket OST-2002-11741
COMMENTS OF THE AIR TRANSPORT ASSOCIATION OF AMERICA, INC. 1
On March 4, 2002, the National Air Carrier Association petitioned to amend
certain Department regulations governing the authorization of charter operations by
foreign carriers. ATA opposes NACA’s proposals which effectively would re-regulate
international charter services. Neither the current economic condition of the industry, the
prospect of multilateral civil negotiations with the member states of the European Union,
nor heightened security considerations provides a legitimate basis for rolling the clock
back on the deregulation of charter services. However, the Department should insist on
vigorous adherence to the provisions of its air service agreements. Among other things, it
should be vigilant to prevent foreign carriers from gaining access to restrictive U.S.
1
The Air Transport Association of America, Inc. (ATA) is the principal trade and service
organization of the U.S. scheduled airline industry. Members are: Airborne Express, Alaska Airlines,
Aloha Airlines, America West Airlines, American Airlines, Atlas Air, Continental Airlines, Delta Air
Lines, DHL Airways, Emery Forwarding, Evergreen International, Federal Express, Hawaiian Airlines,
JetBlue Airways, Midwest Express Airlines, Northwest Airlines, Polar Air Cargo, Southwest Airlines,
United Airlines, United Parcel Service, and US Airways. Associate members are: Aeromexico, Air
Canada, KLM-Royal Dutch Airlines, and Mexicana. NOTE: This filing does not reflect the position of
ATA member American Trans Air, whose employees have filed comments separately in this proceeding.
Comments of the
Air Transport Association
Page 2 of 9
markets by erroneously characterizing themselves as nationals of countries with which
the U.S. has open-skies agreements.
1.
The NACA Petition.
In its petition, NACA seeks to limit the Department’s flexibility to implement its
procompetitive policies by changing the rules applicable to foreign air carrier charter
operations. These operations, known as fifth-freedom charters, involve the carriage of
traffic between the United States and a third-country foreign point (i.e., not in the
homeland of the foreign carrier), regardless of whether the flight itself has any connection
to the carrier’s homeland. The NACA petition proposes to restrict these operations by:
1) Adding new definitions of the so-called Freedoms of the Air to 14 C.F.R. Part
200;
2) Adding a new requirement for commercially equivalent reciprocity to the
Department’s charter rules in 14 C.F.R. Part 212;
3) Altering the Department’s methodology for determining the extent of a foreign
carrier’s reliance on fifth-freedom charters; and
4) Establishing a right of first refusal on all so-called “seventh-freedom” passenger
charter flights.
On March 21, 2002, the Department published a Notice in the Federal Register
requesting comments and views of direct air carriers and trade associations on the NACA
petition. These comments respond to that request.
Comments of the
Air Transport Association
Page 3 of 9
2.
Overview.
ATA fully supports the U.S. government’s policy of placing maximum reliance
on competitive forces to determine the price, level, and quality of air transportation
service. Further, ATA agrees with NACA that the U.S. government must enforce its
bilateral rights vigorously, especially, but certainly not exclusively, when the foreign
government involved restricts U.S. carrier operations. Nothing in NACA’s petition
suggests that the U.S. government lacks the ability to ensure that foreign governments
comply with their bilateral commitments. Therefore, ATA respectfully disagrees with
NACA’s proposal to tighten the rules.
Finally, the Department should require, as a condition of any statement of
authorization for passenger charters issued under 14 C.F.R. Part 212, that the carrier
waive the liability limits under the Warsaw Convention. It has been approximately six
years since major international carriers agreed to waive those limits under the auspices of
both IATA and ATA, and the Department should ensure that all carriers operating in the
United States adopt liability rules that are adequate to protect the public.
Our specific comments on the NACA petition follow:
3.
Modification of the Freedoms of the Air Would Encourage Protectionism.
The NACA petition relies on the 1944 International Air Transport Agreement,
which it describes as part of the Chicago Convention, for the proposition that the
Department’s current definition of fifth-freedom charters incorrectly includes traffic
Comments of the
Air Transport Association
Page 4 of 9
carried to or from a third country “regardless of whether the flight operates via the home
country.”2 The International Air Transport Agreement does not support this proposition.3
The International Air Transport Agreement was a separate treaty included in the
Final Act of the Chicago Conference.4 Unlike the Chicago Convention, it was adopted
by only 16 countries and never gained widespread acceptance. The United States
initially signed the agreement, only to repudiate it in 1946.5
The International Air Transport Agreement did not limit its definition of the
fifth-freedom to traffic carried on a flight that operates via the carrier’s homeland.
Instead, it limited its grant of traffic rights for fifth-freedom operations to flights
involving a “reasonably direct line out from and back to the homeland” of the carrier.6
2
Petition of NACA at 2 (citing 1981 CAB regulation).
3
Moreover, the International Air Transport Agreement is not part of the Chicago Convention itself.
As discussed below, it was developed at the 1944 Chicago Conference, but it is an entirely separate
multilateral treaty and it is not in force for the United States.
4
International Air Transport Agreement, signed at Chicago, Dec. 7, 1944; entered into force Feb. 8,
1945.
5
See Gidwitz, THE POLITICS OF INTERNATIONAL AIR TRANSPORT, at 50.
6
Article 1, Section 1 of the International Air Transport Agreement provides:
Each contracting State grants to the other contracting States the following freedoms of the air in
respect of scheduled international air services:
(1) The privilege to fly across its territory without landing;
(2) The privilege to land for non-traffic purposes;
(3) The privilege to put down passengers, mail and cargo taken on in the territory of the
State whose nationality the aircraft possess;
(4) The privilege to take on passengers, mail and cargo destined for the territory of the
State whose nationality the aircraft possesses;
Comments of the
Air Transport Association
Page 5 of 9
That limitation, which applied equally to third-, fourth-, and fifth-freedom services
under the Agreement, was manifestly not a qualification on the definition of the
freedoms themselves.
As Bin Cheng has noted, attempting to refine the definition of the five freedoms
of the air into six, seven, and even eight freedoms has a significant adverse consequence:
But it hardly needs pointing out that the more refined these distinctions
become the more restrictive is the policy pursued; for every newborn
“freedom of the air” is in reality an additional shackle on the right to fly of
foreign carriers, to be removed only at a price.7
The ATA member carriers vigorously oppose any effort to add new operating shackles,
whether by refining definitions or by any other method, since any restriction adopted by
the United States will be applied reciprocally to U.S. air carriers.
4.
“Commercially Equivalent Reciprocity” is Inconsistent with U.S. Reliance on
Competition.
The NACA petition would replace the Department’s reliance on “substantial
reciprocity” in reviewing applications for fifth-freedom charters with a new requirement
that the homeland market of the foreign carrier be “substantially equivalent in available
(5) The privilege to take on passengers, mail and cargo destined for the territory of any
other contracting State and the privilege to put down passengers, mail and cargo coming
from any such territory.
With respect to the privileges specified under paragraphs (3), (4) and (5) of this Section, the
undertaking of each contracting State relates only to through services on a route constituting a
reasonably direct line out from and back to the homeland of the State whose nationality the aircraft
possesses. [Emphasis added.]
7
B. Cheng, THE LAW OF INTERNATIONAL AIR TRANSPORT at 17 (1962).
Comments of the
Air Transport Association
Page 6 of 9
traffic volume” to the market for which the carrier seeks charter approval. This definition
of economic reciprocity proffered by NACA—equal access to markets that are as large as
the market foreign charter operators are serving—is fundamentally inconsistent with the
Department’s open-skies policy. To the extent it would apply to all-cargo operations, it
would expressly violate certain of those agreements.8
The Department enters into open-skies agreements to open foreign markets to
competition from U.S. and foreign carriers for the benefit of the economy as a whole—
not to guarantee reciprocal access to similarly sized markets. The Department makes this
point in its final order defining open skies: “Indeed, if we were to embark on negotiation
initiatives only where we could anticipate precisely equal economic benefits we would
have been deterred from some of our most successful agreements we have achieved in the
last decade.”9 The Department’s policy for more than a decade has been to liberalize
access to markets regardless of their size, and NACA’s proposal is a step in the wrong
direction.
The Department should not allocate its resources to protecting U.S. carriers from
foreign competition merely because the homeland markets of those carriers are small.
Instead, the Department should continue its successful efforts to open all restricted
8
See, e.g., U.S.-Malta Air Transport Agreement, Annex II (exchanging seventh-freedom cargo
charter rights).
9
In the matter of defining “Open Skies,” Docket 48130, Order 92-8-13 at 2 (Aug. 12, 1992).
Comments of the
Air Transport Association
Page 7 of 9
markets to all U.S. carriers. A material deviation from the Department’s economic policy
in this area would signal that the Department is leaning toward protectionism, which will
inevitably make ongoing and future liberalization efforts more difficult—to the detriment
of U.S. carriers, travelers, shippers, exporters, and businesses.
5.
A Right of First Refusal is Protectionism.
The NACA petition proposes to grant to U.S. carriers a right of first refusal for
what it describes as seventh-freedom passenger charter traffic. This proposal is also
antithetical to the Department’s open-skies policy. It violates the spirit of U.S. openskies agreements, as well as the U.S. Government’s opposition to first-refusal rights.10 A
significant number of open-skies agreements contain specific language prohibiting the
use of a “first-refusal requirement.”11 Adoption of this proposal could invite countries
that are already parties to open-skies agreements with the United States to implement
similar conditions. More so, a right-of-first-refusal requirement would be contrary to the
Department’s continued attempts to liberalize the global aviation market.
10
Answer of Atlas Air, Inc. to Petition of National Air Carrier Association for Rulemaking, Docket
OST-2002-11741-2 (March 13, 2002). See also Order 98-9-29, where the Department denied requests for
overflight authorizations based on its finding that reciprocity did not exist where the Canadian government
allowed a right of first refusal.
11
See, e.g., U.S.-Guatemala Air Transport Agreement (May 8, 1997), art. 11(3): "Neither Party shall
impose on the other Party's designated airlines a first-refusal requirement, uplift ratio, no-objection fee, or
any other requirement with respect to capacity, frequency or traffic that would be inconsistent with the
purposes of this Agreement.”
Comments of the
Air Transport Association
Page 8 of 9
NACA’s right-of-first-refusal proposal also invites the Department to re-regulate,
which goes against the Department’s long-standing goal of relying on the marketplace to
determine the price and variety of air transport services available to consumers. The
Department already has a list of public interest factors that it must consider before
authorizing operation of the foreign charters in question.12 As Atlas Air stated in its
answer to NACA’s petition, vigorous enforcement of these public interest factors would
ensure the fair treatment of U.S. carriers and would eliminate any need for a right of first
refusal.13 Re-regulation, on the other hand, would create only unnecessary bureaucracy
and disagreements with other countries.
6.
Conclusion.
ATA does not support a return to the reliance on protectionism and regulation in
international charter or any other markets proposed by NACA. Instead, ATA continues
to firmly support the U.S. Government’s well-established policy of letting competitive
market forces determine the price, level and quality of air transportation service.
12
14 C.F.R. § 212.11(b).
13
Answer of Atlas Air, Inc. to Petition of NACA for Rulemaking, Docket OST-2002-11741-2 at 6.
Comments of the
Air Transport Association
Page 9 of 9
Respectfully submitted,
________________________
Rhett D. Workman
Director, International Programs
Air Transport Association of America, Inc.
1301 Pennsylvania Ave., N.W.
Suite 1100
Washington, D.C. 20004-1707
Phone: 202-626-4110
Fax: 202-626-4159
Email: rworkman@airlines.org
May 14, 2002